INTRODUCTION TO THE

WHOLESALE
ELECTRICITY SPOT
MARKET (WESM)
WHAT IS THE WESM?

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 WHOLESALE ELECTRICTY SPOT
MARKET
How is power delivered to customers?
Generation
Companies
Transmission
System Operator

Distribution Utility Distribution Utility Distribution Utility

End-Users End-Users End-Users

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POWER INDUSTRY
PARTICIPANTS
Before 2001
Generation Companies Independent Power Producers

Transmission System Operator • Scheduling

• Pricing
• Dispatch
• Settlement

Distribution Utilities /
Directly-Connected
Customers (DCC)

- regulated

Note: Lists of IPPs and DUs are non-exhaustive. 4

ELECTRIC POWER INDUSTRY
Transition to competitive regime

Electric Power Industry

Reform Act (EPIRA)

 Generation is
competitive and open

 Establishment of the
Wholesale Electricity
Spot Market (WESM)

 Transmission and
distribution are
regulated services

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POWER INDUSTRY
PARTICIPANTS
After 2001
Generation Companies

• Scheduling
Market Operator
• Pricing
• Settlement

Transmission System Operator

• Dispatch

Distribution Utilities / DCCs Retail Electricity Suppliers

- regulated - competitive
Note: Lists of GenCos, DUs, and RESs are non-exhaustive. 6
WHOLESALE ELECTRICITY SPOT
MARKET
What is the role of the WESM?
Pre-EPIRA
NPC manages dispatch of its plants L

Transmission
System L

All settlements are with NPC

L

IPP Central platform for dispatch L

scheduling

IPP Transmission
System L

IPP Central mechanism for accounting of all

transactions L
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EPIRA
WHOLESALE ELECTRICITY SPOT
MARKET
Advantages of the WESM
• Settlement of imbalances beyond
contracts
• Economic scheduling and
dispatch of capacities
• Promotion of cost-effective
operations through competition
• Transparency on power system
operations
• Accountability of trading
participants

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HOW DOES THE WESM
WORK?

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HOW DOES THE WESM WORK?
Market Processes

Registration Scheduling Pricing Dispatch Settlement

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HOW DOES THE WESM WORK?
Market Processes

• Mandatory registration prior to

injecting or withdrawing
electricity
• Direct or indirect participation

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HOW DOES THE WESM WORK?
Market Processes
• Gross pool scheduling based on
offers and bids
• 5-min dispatch intervals
• Schedules are published every
5 minutes
• Considers transmission system
capacities
• Facilitated through the Market
Management System (MMS)
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SCHEDULING
How are the schedules determined?

200 MW
IPP A Transmission
@ P 5.0 / kWh System

IPP B
100 MW L 200 MW
@ P 2.0 / kWh
Demand

P/kWh
300 MW
IPP C @ P 1.0 / kWh
L 100 MW

150 MW
IPP D
@ P 3.5 / kWh L 250 MW
Scheduled to MW
50 MW dispatch
IPP E
@ P 3.0 / kWh 550 MW
Other considerations: transmission system
limitations, real-time system status

Generators are dispatched according to

their offer price from the cheapest to the
most expensive
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SCHEDULING
How is scheduling facilitated in the WESM?
Trading Participant Market Operator System Operator

Market Network Demand

Model Forecast

Real-Time
Offers and Bids System Status

Individual
Schedules All Schedules

Market
Management
System

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HOW DOES THE WESM WORK?
Market Processes
• Set by the offer price of the plant
necessary to serve the demand
• Locational Marginal Pricing
• Prices are published every 5
minutes
• Special pricing conditions (e.g.,
must-run unit, administered
pricing, price substitution
methodology, secondary cap)
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 PRICING
Locational Marginal Pricing
Locational System Transmission Congestion
= + +
Marginal Price Marginal Price Loss Price Price

MTNA MTNB

300 MW

Transmission Line Capacity = 400 MW

Offer = 600 MW Offer = 100 MW

@ P 3,000 / MWh @ P 4,000 / MWh

Demand =
300 MW
LMPLoad = P 3,090 / MWh

LMPLoad = 3,000 + 90 + 0

*MTN – Market Trading Node 27

 PRICING
Locational Marginal Pricing
Locational System Transmission Congestion
= + +
Marginal Price Marginal Price Loss Price Price

MTNA MTNB

400 MW 100 MW

Transmission Line Capacity = 400 MW

Offer = 600 MW Offer = 100 MW

@ P 3,000 / MWh @ P 4,000 / MWh

Demand =
500 MW
LMPLoad = P 4,090 / MWh

4,000 – 3,000
LMPLoad = 3,000 + 90 +
= 1,000

*MTN – Market Trading Node 28

HOW DOES THE WESM WORK?
Market Processes
• 5-min dispatch intervals
• Dispatch schedules are
published every 5 minutes
• Self-compliance to schedules
• Week-ahead, day-ahead, and
hour-ahead projections
• Market intervention or
suspension

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HOW DOES THE WESM WORK?
Market Processes

• Day-after contract declaration

• Net settlement
• Monthly billing period (26th to
25th)
• Preliminary and final settlement

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TYPICAL DAY FOR A GENERATION
COMPANY

WESM Participation

• Submit generation offers

• Comply with 5-min dispatch
schedules and SO
instructions
• If necessary, submit reports
related to dispatch
• Submit contract quantities for
transactions the previous day

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TYPICAL DAY FOR A CUSTOMER

WESM Participation

• Confirm contract quantities

submitted by GenCos
• (Optional) Submit load forecasts
• (Optional) Submit demand bids

Recommended Practices

• Monitor prices
• Monitor real-time consumption

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WESM GOVERNANCE
• Oversight Regulation: DOE & ERC
• PEM Board
• Governance Committees:
o PEM Auditor
o Rules Change Committee
o Dispute Resolution Administrator
o Market Surveillance Committee
o Technical Committee

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MITIGATING MEASURES
• WESM Offer Price Cap and Floor
o Generators can only offer up to P 32 / kWh
o Generators can offer as low as P -10 / kWh

• Secondary Cap
o Sustained high prices (average of P 9 / kWh)
for 168 trading intervals
o Prices will be capped at P 6.245 / kWh until
average goes below P 9 / kWh

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WESM MINDANAO
Target Launch Date

Luzon – 26 June 2006

Visayas – 26 December 2010

Mindanao – 26 June 2017*

*Target launch date 49

WESM MINDANAO
Expected Trading Participants
83 Trading Participants

32 28 4 19
Generation Electric Private End-Users
Companies Cooperatives Distribution
Utilities

51 Customers 50
WESM MINDANAO
Preparatory Activities
• Capacity Building
o Trial Operations
o Information Dissemination
o Participant Trainings
• WESM Registration
• Readiness Assessment

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 END OF
P R E S E N TAT I O N
WESM Works.

WESM Helpdesk Ticketing System

www.wesm.ph/wesm-helpdesk
+63.2.318.WESM (9376)

+63.2.634.0985
www.wesm.ph
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